Premium
Social Efficiency of the Bankruptcy Reform Act of 1978 With Regard to Personal Bankruptcy
Author(s) -
SULLIVAN A. CHARLENE,
DRECNIK DEBRA A.
Publication year - 1984
Publication title -
journal of consumer affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.582
H-Index - 62
eISSN - 1745-6606
pISSN - 0022-0078
DOI - 10.1111/j.1745-6606.1984.tb00330.x
Subject(s) - bankruptcy , debt , legislation , insolvency , business , actuarial science , economics , law , accounting , law and economics , finance , political science
A socially efficient bankruptcy law is one that would have the effect of minimizing the present value of social costs stemming from bankruptcy while permitting debtors to make a “fresh start.” Analysis of a sample of petitions for personal nonbusiness bankruptcy filed under the Bankruptcy Reform Act of 1978 shows that about 30 percent of petitions for Chapter 7 and about 25 percent of petitions for Chapter 13 were cases where social costs were not minimized as would be required under socially efficient bankruptcy legislation. The social costs of Chapter 7 may be reduced under proposed reform [S. 445 and H. R. 1800] as the judge would be provided with information concerning estimates of debts repayable under both chapters and would disallow those Chapter 7 cases which represented a substantial abuse of bankruptcy law. The study data suggest that guidelines for acceptance of Chapter 13 cases should also be scrutinized. In particular, petitioners should be discouraged from providing “token” debt repayment plans while maintaining ownership of large accumulations of assets.